Balancing Stakeholder Interest and Corporate Values: A Cummins Strategic Decision Harvard Case Solution & Analysis

Balancing Stakeholder Interest and Corporate Values: A Cummins Strategic Decision Case Study Solution

Impact of the total cost of ownership:

According to Exhibit of total cost of ownership,the shift of existing engines used by all organization in the manufacturing of engines for heavy-duty trucks. The impact of total cost of ownership with respect to time will be higher for customers due to entire change in the engine system and cost of manufacturing plus investment for testing and changes required according to the guidelines of EPA consent decree. (Wigodsky, 2004)

Short term and long term effect:

Considering total cost of the ownership, initially, as the effect of short-term plan; there will be significant decrease in the market share. As the cost will be higher which will restrict customers to buy engines with the ERG system.

Due to the increased emission of greenhouses gases in future, it will be better understood by customers that ERG system are either not cost-effective but are according to the requirements to reduce the emission of gases like nitrogen oxide which are not only hazardous for the environment but also for humans well being. Therefore, the long-term effect of the ERG system will significantly demonstrate increase in the market share than expected.

Impact of Engine technology development on Cummins’s decision:

With respect to the rules and regulations of EPA, it was declared that any manufacturer until be able to reduce the emission of nitrogen oxide (greenhouse gas) according to the set standards.They will receive NCP (Non-conformance penalty) for increased emission of NO.

For this purpose, the development of engine technology was mainly to reduce the damage to environment and people living in the community as Cummins’s motive is also to provide its customers with a safer environment and community in which they live. As per this concern, the advancement in the technological use of engines and its manufacturing by larger manufactures in heavy-duty industry was pressurized to be adopted by each organization.

Due to the fact, the shift of use of engines from their each organization’s respective ones to the Exhaust Gas Recirculation was for protection of environment. Rather, it required high investment cost which had been invested by Cummins. This was due to the reason that Cummins considered the deadline of EPA serious as it was the member of EPA agreement. Previously, before signing of EPA’s agreement and announcement of pull forward deadline to launch ERG engine systems in the market otherwise, they will be charged for non-conformance penalty.

These developmental changes and implications had affected other organizations which as a result pressurized Cummins to change its mind set of launching its transformed engine according to the guidelines of EPA. These developmental changes and the effect of stakeholders in making of decision had left him in dilemma. While, delay of deadline will allow Cummins to rebuild the trust over customers against conspiracy of Caterpillar. On the other hand, as Cummins had experienced worse conditions due to the economic crisis of the United States and tended to be one of the largest manufacture of heavy-duty truck’s engines.

Focusing on all the conditions by all stakeholders and change in engine development, the changes were significant in terms of corporate social responsibility meeting the standards of its missions and value statements. The issue raised dilemma for Cummins in decision making was based on the evaluation of the expected outcome of both the alternatives which were asked to be estimated by the executive team of Cummins.

On the contrary, according to Cummins their hope plays a strategic part in their innovative and creative technology that they develop which is specifically coupled with their available engine knowledge which helps customers of Cummins in the development of successful alternatives against their problems in order to move people in a quick and efficient manner with as little influence on the environmental conditions as possible.(Cummins, 2014)

Conclusion:

Conclusively, Cummins is one of the biggest independent manufacturer of diesel engine with capability of heavy duty throughout the world with a mission to make lives better.The stakeholders Cummins include both Government, Competitors and customers affecting the business and its performance on the basis of decision made by Cummins. Among all only government wanted Cummins to follow consent decree. Initially, the effect of short-term plan; there will be significant decrease in the market share, whereas, there will be a significant increase in the market share as a long-term effect.

Exhibits

Exhibit –Cummins’s decision on EPA consent decree

Exhibit – Total cost of ownership

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